Confusing brand for #reputation, CEO John Cryan demands that “Deutsche Bank should once again stand for integrity and credibility — for me that objective is not negotiable.” And confusing compliance with reputation #risk management, Chairman Paul Achleitner said “Deutsche was taking ‘extensive legal advice’ on whether former management board members bore ‘personal or collective responsibility’ for misconduct during their period in office.”

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#Reputation #Risk “Corporate names are resilient: when their images get damaged, a change of management or strategy will often revive their fortunes. But personal reputations are fragile: mess with them and it can be fatal,” wrote John Gapper for the Financial Times in August, 2016.

How is it some firms have been able to bounce back while others are unable to survive?
Both the German car giant Volkswagen and South Korean mobile phone maker Samsung have been mired in controversy in recent times.
VW is still dealing with its diesel emissions scandal, and Samsung has had to face overheating phone batteries.
Yet both have put these corporate disasters behind them.

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An operational failure in business process controls or supply chain integrity management can help sharpen the difference between the value of a reputation, and the value of a brand. For a company like GM being roiled by evidence of longstanding failures in governance, controls and risk management, the difference implies two very different future courses.

If corporate reputational value were nothing more than immediate public opinion — like brand awareness — then the company could rely on consumers’ ability, if not overt desire, to forget the past and literally “buy” the company’s latest sales pitch. But reputation is an asset based in operational reality, not the minds of consumers, and GM faces a long list of stakeholder expectations, and resulting valuations, that won’t be easily erased or forgotten. From processes to supply chain relationships, analysis and reporting thresholds, to all of the substance of its relationships with its various communities have been called into question by the ignition crisis, and those stakeholders are and will make future decisions based on it.

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Tuffy, a brand of auto-repair franchises, acquired a terrible reputation affirmed when its local franchise owner was arrested on felony charges for stealing from customers. A new owner bought the brand. Then he had to rebuild its reputation.

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A buyer of illicit drugs with a reputation for toughness meets stakeholder expectations by stabbing repeatedly a dealer who failed to honor his commitment to sell. Not to do so would create reputation risk and in certain markets, reputation risk can be costly, indeed.
Read more.

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British car buyers would rather buy Japanese-made Japanese branded cars than British-made Japanese branded cars. As the Consensiv blog explains, it was the reputation of Japanese workmanship and quality that sold the cars, not the brand.
Read more.

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An opinion survey's purpose is to discover what respondents think, not to influence or alter it. Actually, beyond "think," the real purpose is to obtain an indication of how the respondents will behave; e.g., vote for a candidate or buy a branded product. The problem with surveys is that what people think about candidates or brands is not necessarily an indication of what people will do about a candidate or product. The "moment of truth" can be shocking when expectations fed by opinion surveys are dashed by the realities of behavior as was demonstrated so vividly by Karl Rove in the 2012 US Presidential election.

Brands are about emotions and connections; reputations are about behaviors. To wit, A mere 38 percent of voters in New Jersey approve of Governor Chris Christie's post-Sandy efforts, more than half find him culpable for "Bridgegate," and yet 90 percent of respondents to a survey said they would vote for him again. So how badly damaged is the Governor's reputation?

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Here's one more entry in the ongoing series on the difference between brand and reputation. In this most recent posting, Jonathan Salem Baskin from Consensiv explains to a Risk Managers' group on Linked-In why understanding the difference is important...to risk managers. Read more here.

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It seems like only yesterday that Huygens read about Beam, Inc., the global alcoholic beverages company, and how its annual regulatory disclosure on reputation risk (10K item 1A) wasn't helpful to investors. According to the study reviewed in Agenda, the Financial Times service, Beam didn't seem to understand that its reputation emerged from its operations. Rather, the firm seemed to confuse reputation with brand. The study suggested that better risk disclosure, evidencing better operational controls, could boost value.

For a company that understood how operations underpinned reputation, this seemed like an opportunity to discover hidden value. Take a company like Beam with a well known brand and significant reputational value, and improve it even further by reducing operational risks.

And so it came to pass Monday that Japan's Suntory purchased $10B Beam. From Reuters:

Suntory Holdings Ltd SUNTH.UL on Monday said it would buy U.S. spirits company Beam Inc (BEAM.N) for $13.6 billion cash in a deal that would make the Japanese company the world's third-largest spirits maker.

Including the assumption of Beam's net debt, the deal is valued at $16 billion. It brings together Beam's Jim Beam and Maker's Mark bourbons, Courvoisier cognac and Sauza tequila with Suntory's Yamazaki, Hakushu, Hibiki and Kakubin Japanese whiskies, Bowmore Scotch whisky and Midori liqueur.

The reputational value profile of Beam, according to Consensiv and based on Steel City Re's reputational value metrics, is shown below. It is worth noting that while the Reputation Premium is near the top of the heap, the Consensus Trend, CT, has been hovering often above the median of 55 companies in the peer group.

For more background on the Consensiv reputation controls, click here. To view the December 2013 reputational value league table, based on Consensiv's metrics, and available exclusively at CFO.com, click here. Last, to read more about how reputational value is linked to stakeholder expectations and enterprise value, read, Reputation Stock Price and You: Why the market rewards some companies and punishes others (Apress, 2012) (click here).